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Barroso declares "sea change" in economic governance of the EU

FT: Eurozone leaders must stomach the idea of sovereign default

There is widespread coverage of the proposals for stronger economic governance unveiled yesterday by EU Commissioner for Economic and Monetary Affairs Olli Rehn. The first set of proposals only envisages financial sanctions for rule-breakers and is restricted to eurozone member states. Fines for countries which persistently fail to meet the Stability and Growth Pact criteria will be "quasi-automatic", meaning that they could only be blocked by a qualified majority within the Council. Controversially, sanctions could possibly be imposed on countries with trade or current account imbalances.  

 

European Commission President Jose Manuel Barroso said, "The proposals we are making today represent the biggest step forward on economic governance since we adopted the Stability and Growth Pact. Once approved and implemented by the Member States, they will mark a sea change in the way economic governance is dealt with in the European Union, and in particular in the Euro area".

 

Meanwhile, in an interview with Euractiv Deutschland, Austrian Chancellor Werner Faymann has voiced his opposition to Treaty changes aimed at strengthening the EU's economic governance. "Everything that is within the bounds of current legal measures can be used. But all measures that would require Treaty change I find - thinking back to the Lisbon Treaty - hard to imagine in the next two years", he said.

 

In the WSJ, Richard Barley argues that the Commission's "proposals still represent something of a transfer of power to the Commission - and for that reason alone, some countries may try to water them down."  A leader in the FT argues, "A well-enforced [Stability and Growth] pact might have stopped Greece's reckless borrowing sooner, but would not have stopped the problems in Spain and Ireland, which were built up by private financial flows." It concludes that EU leaders cannot "stomach the idea of eurozone sovereign default. No one wants that, but an open-ended promise of bail-out weakens the force of the best-laid rules."

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